Monday, December 15, 2014

If
you liked Chevron at $120 will you still like it a $99 or how about $69?

Since
I started writing my income investing blog, Chevron, symbol CVX made the grade
as a Dividend Machine in every one of the four portfolios (2011, 2012, 2013 and
2014) I created using my four Dividend Machine criteria.Stocks I call Dividend Machines are one of
three investments I use to create income.

The
four criteria I used to pick Dividend Machines are: yield had to be no less
than 3% until 2014 when I upped the minimal yield to 3.5%;EPS (earnings per share) during the previous
four quarters had to be greater than the dividend paid out during the previous
four quarters; dividends had to grow consistently and in 2014 I required a 5
years history of at least 4% annual dividend increases; and finally D/E (debt
to equity ratio) had to be 1 or less or within industry standards.

Chevron
as a Dividend Machine

The
first time I picked Chevron was January 31, 2011; CVX’s price that day was
$93.37.In 2012 I picked CVX on June 25,
2012 at a price of $98.90.In 2013 and
2014, CVX’s stock price was about $120; December 13, 2013 $120.50 and finally
January 20, 2014 at $119.29.

I
buy stocks for income and while I do not like to lose money when prices
fluctuate, I have confidence in my four criteria.With good D/E ratios I am pretty sure my
companies are not going to go bankrupt.The key question is will the Dividend be safe and will the dividend increases
continue?

I tend to hold onto my
Dividend Machines through thick and thin.

The
question is if I liked Chevron at $120 will I add at $99?Will I add at $69?Will I sell in a panic? A real bear market scares everyone.

Effect
of Crude Oil Price on Chevron’ stock price

Oil
prices have a major effect on oil company stock prices. Oil prices also drive
earnings of these companies.Earnings
drive dividends so it is important to look at the relationship between oil
prices and CVX stock price.

Below
are two charts:one is the chart of
crude oil over the past 10 years and the other is a chart of Chevron’s stock
price over the same period.You can see
a similar pattern.

In
2009 the price of crude dipped to just above $40 and Chevron’s price dipped to
around $60.In 2008 crude spiked at
around $140 and Chevron’s price was up but it did not spike as much as crude.Yet in 2014 with crude at about $110,
Chevron’s price was very strong hitting the $130 mark.The point is that crude oil prices are
slumping and that will affect Chevron’s stock price.You may get the chance to buy CVX at $99 or
maybe even $69.Should you buy?

Source: NASDAQ

Source
NASDAQ

Effect
of Oil prices on Earnings and Dividends

Let’s
look at earnings during these times of tumult where crude prices moved a lot
and so did Chevron’s stock price.Earnings drive dividends and as income investors, we care about
dividends.Between 2004 and 2014
Chevron’s earnings moved from $6.28 per share in 2004 to $10.86 per share most
recently.This has not been a straight
line up.During this 10 year period
some years were better than others and lately earnings have declined.This is not unusual.Earnings also declined during the crude slump
in 2009.

Dividends,
on the other hand have had a straight line up.In 2004 Chevron’s quarterly dividend was $.40 and today it is
$1.07.I do not fear crude oil prices
declines, nor do I fear the related earnings declines because history suggests
that Chevron will continue to pay the dividend and even increase it.

The
answer is yes; I will like it at $99 and I will like it even more at $69.

Tuesday, December 9, 2014

This
article is about two stocks I am evaluating as potential Dividend Machines for
2014.Both
are worthy of consideration.By the way,
this will probably be the last DM (Dividend Machines) I name for 2014 which will
bring the number of 2014 Dividend Machines to seventeen.

Everyone
should take a break from “work” and take a serious look at their
portfolio.I will be doing this over
the next month or so.Last minute portfolio moves are a
consideration.For instance, will you
fund your favorite charity with IRA money if the Senate extends that tax rule?Have you measured the true income you get
from your investments?The end of the
year is a good time for portfolio reflection

One of the stocks he/she (I do not
know this person) listed is Maiden Holdings, symbol MHLD.Maiden is a reinsurer that serves the global
market.MHLD has paid dividends since 2008.It is a small cap stock.

As
you know I use only four criteria to screen for Dividend Machines and MHLD’s
data are presented in the table below.

I
hinted at Laclede as my next 2014 Dividend Machine on November 30 and I
wish I had added it to the portfolio then because today it is 4% higher than it
was when I hinted at including it in the portfolio.Like all investors, I have a lot of
excuses as to why I did not pull the trigger that day.

Today,
both LG and MHLD remain Dividend Machine candidates and they will be my last picks of
2014.The portfolio will be
closed.No stocks will be bought or
sold.Dividends will not be
reinvested.I will follow this
portfolio and report on its performance over time.

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Covered Call Opportunities

Square, symbol SQ, is my current favorite stock that is not a dividend machine. To turn it into an income investment, I use SQ's volatiity to buy when it dips and sell calls. See the table above. Note that this call is not included in the post published on 12/12/18 M*

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TheMoneyMadam's Story

My income investing success came from my experience managing my and other people's money since 1993. Successful income investing requires discipline. In this blog I provide specific investments based on my principles of conservative income investing. I hope to help the thousands or even millions of people who have saved and want to invest their nest eggs to retire with income that grows. M* MoneyMadam

Disclaimer

Information on this blog does not constitute investment advice. Review or mention of any stock, bond, or other investment shall not be considered a buy or sell recommendation. Everything in this blog is the opinion of the author and no warranties are expressed or implied. M*MoneyMadam.